How Long Can Tax Returns Be Audited?

I have written about IRS audits in this space many times over the years because, well, it is something that is easy to be fearful of and that means many people think about it. As such, what we mostly talk about in that area is what may possibly trigger an audit and/or how to avoid one. There also seems to be confusion, though, over just how long after filing a return the IRS can audit it.

The overarching rule is that the federal statute of limitations runs three years after filing your tax return. This is far from set in stone, however, as the IRS’s own verbiage lets you know:

“Generally, the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually don’t go back more than the last six years.”

If you are looking for some sort of comfort then in knowing enough times has passed, modifiers like ‘generally’ and ‘usually’ are not the words you want to see. In the end, what this really says is that if the IRS finds someone was trying to get away with something big, they can always be audited.

​On a sidenote, it may be interesting to see how this plays out over the next couple of years. As has been well documented, the IRS built up a serious backlog of largely paper returns for tax year 2020 that still hasn’t seemed to be completely worked through yet. That would seem to decrease the time that a return would have to be audited once the agency finally looked at it, but the IRS verbiage gives it enough leeway that it can still return to those returns after the three-year deadline has passed.

And a final note about when that deadline clock starts ticking. If one tries to game the system by getting the countdown started by filing early, that helps not at all. If you file on time, for the sake of the three-year window, you are considered to have filed on April 15 (or whenever the deadline was that year). And if you file an extension, your clock then starts on that extension deadline date no matter when you actually file.

But with the deadline being so loose, that matters little anyway, which brings us full circle around to what I always say when discussing audits. The best way to avoid worrying about audits is to submit legitimate tax returns. That way, even if it happens, you have the confidence to know it will only be inconvenient and not have a dire end. 

Warmly,

Josh Bousquet
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